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July 23, 2012 | by  | in Opinion |
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Offsetting the nanny state

The term ‘nanny state’ became a widely used pejorative in New Zealand political discourse. There are some laws which aim to protect us from ourselves that few question. These laws commonly revolve around mandating basic safety measures in risky situations: compulsory seatbelts for car passengers and compulsory helmets for cyclists for example. But many economists actually oppose these policies; counter-intuitively, they could create harm rather than reduce it.

Everyone has a certain level of risk which they are willing to accept when engaging in certain behaviours. If we deem what we are doing to be too risky, we will take steps to mitigate the risk. For example, if the risk of injury from a car crash is beyond what is acceptable to me I can wear a seatbelt, lower my speed or pay more attention to the road in order to feel safer. Conversely, if I feel safe enough I might avoid these measures because they don’t seem necessary. This behaviour has been demonstrated in studies. The prominence of anti-locking (ABS) brakes in modern cars for example has not been proven to lead to any increase in road safety despite being far superior to older systems. When people know they can rely on these brakes they drive faster, follow closer and brake later.

But some risk reducing behaviours are superior to others because they also reduce the harms to third parties. Imagine a world where there are only two measures which I can take to reduce my chance of being injured in a car crash: driving at a slower speed or wearing a seatbelt. Both measures make me less likely to get injured, but it follows that if I wear a seatbelt I will be incentivised to drive faster to keep my level of risk relatively constant. The problem is that driving faster increases the level of risk to pedestrians, passengers and other drivers who could be injured in the crash, and the harms to whom I am unlikely to fully take into account (especially with ACC, which prevents liability for the costs of injuries). So when people wear seatbelts and have airbags they keep constant the level of risk they expose themselves to, but expose others to more risk.

The best policy then would be regulations which maximise the risks to drivers from a crash. Imagine how it would affect your driving if from every steering wheel protruded a large spike, aimed directly at the driver’s heart. Such a plan has been jokingly proposed by economist Gordon Tullock because the ‘offsetting behaviour’ it leads to would protect pedestrians. This novel line of thinking was an inspiration for New Zealand’s best economics blog, which is run by University of Canterbury economist Eric Crampton. Check it out at 

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